May 28 (Bloomberg) -- The University of Oxford, the oldest university in the English-speaking world, plans to raise 1.25 billion pounds ($2.5 billion) for new buildings and faculty to compete with Harvard and Yale for students and research funds.

About 575 million pounds has been raised, with 25 million pounds from the Garfield Weston Foundation for the Bodleian Library and another 25 million pounds from Wafic Rida Said for the business school named after him. More than 20,000 donors have pledged money, Oxford said today at a press conference in London.

Fundraising by Oxford, in central England, has lagged behind that of Harvard and Yale. Harvard had an endowment of $34.9 billion as of June 30, the largest of any college in the U.S., while Oxford and its 39 colleges had 3.4 billion pounds last year. Teaching at Oxford started in 1096, and the school has educated 25 U.K. prime ministers, including Tony Blair and Margaret Thatcher.

``Oxford is competitive worldwide, but in order to maintain our position and develop further, it's critical that we raise additional resources,'' development director Sue Cunningham said in an interview.

The campaign is ``the most sustained, coordinated fundraising effort ever undertaken by a European university,'' Vice-Chancellor John Hood said in an e-mailed statement. Oxford ``must significantly increase the university's endowment if it is to establish a strong philanthropic foundation for the future.''

Spending Plans

The university wants to fund scholarships for undergraduate students, endowments for 200 existing and new academic posts and the restoration of facilities including New Bodleian Library and Balliol College.

Oxford has 12,106 of undergraduate students and 7,380 postgraduate students. High-quality postgraduates are ``vital'' to preserve Oxford's status as `` leading'' research university, Cunningham said.

Oxford attracts students from around the world and is trying to keep its influence as an international center of learning. Former U.S. President Bill Clinton studied at Oxford as a Rhodes scholar. The university educated Indian Prime Minister Indira Gandhi, Australian Prime Minister Bob Hawke and News Corp. Chairman Rupert Murdoch.

``Raising money is a high priority so we can compete with Yale or Harvard,'' said William Connor, director of development at Oxford's New College. ``We often lose good students and academics to U.S. universities who have better financial resources.''

Tighter Funding

U.K. higher education has been hampered by falling government funding and restrictions on how much they can charge students.

Oxford has 39 independent and self-governing colleges. The University of Cambridge, its U.K. rival, comprises 31 colleges. Fundraising has traditionally been done by each of the colleges independently of the university.

Some 12 percent of Oxford alumni have donated money to the university. The highest ratio of alumni donations per college is 30 percent, vice-chancellor Hood said in an interview. He declined to name the college.

``Rather than aiming for a specific number we want to colleges to improve so that this best practice is shared,'' Hood said.

Raise Targets?

Oxford will review the campaign after 18 months and may raise the 1.25-billion-pound target, depending on its progress. The university will approach alumni and supporters worldwide, Hood said.

``Oxford provided a very stimulating environment for me,'' Oxford graduate and Monty Python member Michael Palin said. ``It gave me options and opportunities to decide about my future life.''

Oxford had income of 676 million pounds in the 2006-2007 financial year. Income of colleges totaled to 252 million pounds in the period. In the past financial year, the endowment assets were approximately 680 million pounds, the statement said.

Cambridge announced its own 1 billion pound campaign in September 2005.

The culture of giving back to universities is new in the U.K., said Peter Agar, Cambridge's director of development and alumni relations.

``People in the U.K. are quite charitable, but traditionally universities haven't been one of the main recipients,'' he said by phone. ``Great universities need philanthropy. Philanthropy is part of the mix that keeps us up there in the top ranks.''

Investment Board

Cambridge raised 663 million pounds as of July 31, and will report its next tally in July. Two years ago, the school announced the formation of an investment board to give advice about its endowment and individual assets.

One of the board's members is David Swensen, chief investment officer at Yale University in New Haven, Connecticut. Under Swensen, Yale's endowment earned a 28 percent return in the fiscal year ended June 30, the highest among the 25 richest U.S. universities.

Harvard counts seven U.S. presidents among its graduates, and Yale educated four of the last six presidents. The two schools have the two largest collegiate endowments in the U.S.

Both Yale and Harvard use dedicated managers to oversee their funds. Harvard, the oldest U.S. college, posted a 15 percent return over the l0 years ended last June. Yale, the third-oldest, had a 17.8 percent gain.

To contact the reporter on this story: Lenka Ponikelska in London lponikelska1@bloomberg.net

Last Updated: May 28, 2008 16:06 EDT